Thursday, November 5, 2015

Top Bankster Jamie Dimon Smacks Down Three Bitcoin Fanboys

Fortune's CEO Daily reports:

On day three of the Fortune Global Forum, which focused on global risks and opportunities, three bitcoin enthusiasts rhapsodized over breakfast about how a stateless digital currency could change world finance.

But a few hours later, JPMorgan CEO Jamie Dimon - weathered by a decade of costly encounters with regulators - brought their high-flying hopes crashing to earth,

"It's just not going to happen. You are wasting your time. When the DOJ calls and says, ‘It's an illegal currency and it's against the laws of the land, and if you do it again, we will put you in jail,' it's over.

"There will be no real-time, non-controlled currency in the world. There is no government that is going to put up with it for long. It's kind of cute now, a lot of senators and congressmen will say ‘I support Silicon Valley innovation,' But there will be no currency that gets around government controls."

Dimon went on to say the blockchain technology used to transport the digital currency could have many uses, and he said his bank is part of a consortium exploring its potential. The blockchain may even be used to transport currency, he said, "but the currency will be U.S. dollars."

24 comments:

Some people don’t care about the risk of going to jail. As rising healthcare costs in the US facilitate a black market more so than ever before, people will risk their freedom in order to get needed drugs for loved ones. Because of this Bitcoin with survive.

The blockchain is bitcoin's Achilles heel. Aside from transaction transparency risk, as it grows in size it becomes less distributive and eventually only hosted on servers. And if the blockchain isn't distributive, it's no longer peer-to-peer and once the blockchain resides only on servers it's no longer what bitcoin purports to be. In my admittedly ignorant opinion anyway.

I'm no fan of Jamie Dimon but he is correct. His point was driven home to me in the 1980's (I know, ancient history). The federal bank regulators called a meeting of all the bank officers of my employer and informed us how we would manage the bank. And if we had any questions about who was in charge he stated: "We gave you this franchise and we can take it away." There were no more questions. And my "high flying hopes" for a free market came face to face with the seriousness of the challenge.

A popular misconception regarding Bitcoin is as XAPO CEO Wences Casares stated best regarding loving the blockchain but not Bitcoin is like saying " I love the browser but I hate the Internet" Please understand one thing, in order for the blockchain to work as it was designed, there must be an incentive for the those whom ensure it's security, integrity and robustness and that happens with payment such as Bitcoin. If what you have is a private block chain on a server, then what you have is glorified centralized Excel spreadsheet such as what the biggest banks already have and we know how those privacy issues go. Just ask Jamie Dimon how JP Morgans suffered the biggest privacy and security breach of all time. It's a good thing they got lots of money to get the best of the best....LOL. So Bitcoin is the whole system, not just a currency.

Blockchain is Bitcoin....you can't say I love the browser but hate the internet. In order to have Bitcoin which is the whole system-collectively, miners need to be incentivized to maintain the security, integrity and robustness of the system which so happens to be Bitcoin. No incentive means you have a glorified giant excel spreadsheet behind a private closed door....welcome to the bank. Just ask how that went for Jamie Dimon, as JP Morgan suffered the biggest security and privacy breach of all time.

The blockchain file size gets bigger and BIGGER... If bitcoin were to become a global currency used by many millions of people, the blockchain file will become so large and unwieldy it won't be downladable or fit on client devices. So the blockchain ultimately ends up only on a server controlled by some unknown entity. Once the blockchain is centrally stored and no longer peer-to-peer, someone gets complete control of bitcoin... Who?

AFAIC the blockchain architecture is fatally flawed.

A proper digital p2p currency solution will keep a history of transactions. Instead the system will validate transactions without storing them centrally. All transaction histories are then maintained on the client-end only for that client's transactions. Such transactions then will be discoverable only by accessing the client history unless of course the Internet as a whole is monitored... then it won't matter. :P

I agree that BitCoin may not continue to be the "currency of the future," and I even agree that it may not even survive, but I find your lack of belief in your own economic philosophy to be painful to observe. Government control is, long term, doomed, even if it is true that "Wow, they've got all the guns!" Anonymous money will thrive one way or another, no matter what wanna-be-powers-that-be desire otherwise. The reason for this is the essential nature of value: it is individual, subjective, imputed, and context-dependent. As the capital base rises and the division of labor network extends and grows more complex, the opportunity costs inherent in the calculation problem will push out command and control systems in favor of more freedom. True, there can be "backsliding" but long-term, it is going to be the case that liberty increases, simply because human beings are, in their fundamental nature, free, and as the Austrians state in the action axiom, they act to achieve their ends. Everyone wants to prosper, and in the end, everyone who is not enamored of self-destruction wants to prosper more than they presently do. It is the idea of government and arbitrary authority that is the contradiction. There is never enough command and control in the world to eliminate freedom and that is precisely what the fall of the Soviet Union should be teaching us. The idea that there will never be anonymous money is flatly false. BitCoin exists now, and if it fails it will be replaced by something even better, and the attempts to control, stifle, regulate, and expropriate people only drives the innovation in undermining and circumventing this control.

So you hate bitcoin because it isn't anonymous? Or because it threatens the government/cronyist monopoly on money?

Gold is anonymous, and threatens government monopoly. If the government clamped down on gold ownership, would you start hating gold too, including deriding those who trafficked in gold despite government restrictions?

Like bitcoin, gun purchases are not anonymous, yet threaten government monopoly. Do you hate gun buyers? If the government clamped down on gun owners would you start hating guns and disparaging those who promote gun ownership?

If you love liberty, and you find yourself proudly and loudly on the same side of an issue as Jamie Dimon and the government, that's your cue it is time to sit down and carefully re-examine your position.

Ditto. Impeccably stated. We can go to any mainstream website to get trumpeting of statist authority, systems, and power along with exhortations.to submit and mockery of alternatives. Getting that here from RW on EPJ is painful to observe.

I come here for the hearty Austrian analysis and good number of pro-liberty perspectives in other areas. I don't have to think the sky is falling to value quasi-legal systems challenging official state systems, such as valuing and cheering on Uber taking on franchised taxi monopolies or valuing and cheering on Bitcoin taking on fiat currencies.

I do know careful submission and perpetual acquiescence to the powers that be and status quo, be it in taxi service or in currency, will result in no change or progress, ever.

"careful submission and perpetual acquiescence" What the hell are you talking about?

Bitcoin is dangerous because all transactions are logged on the internet to see. One misstep and all your transactions are revealed. Avoiding such has nothing to do with rejecting government interventions.

Well put, Mr. Wenzel. I did not mean to imply that you do not believe in anonymous money. I also am one who cherishes precious metals and hard money. Allow me to clarify and narrow the focus of my objection. I took your quotation of Dimon to be some sort of endorsement of this idea:

[i]"There will be no real-time, non-controlled currency in the world. There is no government that is going to put up with it for long. It's kind of cute now, a lot of senators and congressmen will say ‘I support Silicon Valley innovation,' But there will be no currency that gets around government controls."[/i]

My contention is that this is fantasy, or else merely sour grapes on the part of Dimon, who is dependent upon government, and hence, more vulnerable to its control. I would have thought that you would realize that just because JPMorgan can effectively be deterred from participating in or facilitating anonymous transactions, it does not follow that Dimon's absolute blanket economic pronouncement on the feasibility of an anonymous real-time non-controlled currency is correct. Government, like war, crime, and slavery, may always be with us, but I put it to you that a rising capital base and a growing division of labor network will always result in raising the costs of such immorality such that its most onerous forms, such as direct, chattel slavery, are inevitably pushed beyond the pale of the main fora of human civilization. Anonymous transactions are already here, even with BitCoin's noted weaknesses. Those weaknesses will continue to be addressed and buttressed, simply because anonymity is something acting human beings value. It is much easier to stop a gold coin at the border than it is to stop a BitCoin. Capital controls and monetary monopolies have not even begin to face the most radical changes to the status quo. I would not think Dimon's supposition to be a safe bet, especially long-term.

Great, glad to hear your primary concern is for their personal safety. In that case you should have no problem joining me to praise and cheer Bitcoin entrepreneurs and activists who, despite the daunting personal risks, do not submit and acquiesce to fiat currency hegemony.

Sure, we can emphasize for the umpteenth time how Bitcoin is not anonymous. We can soberly caution to account for the dire personal hazards of leading a charge against the status quo and powers that be. And if you think the fearsome means and harsh brutality of the state apparatus need review, so be it.

But then, if we love liberty, we must give those who step up to fight for it the level of gratitude and unwavering moral support they deserve. They are the ones investing their time, energy, and fortunes opposing state and cronyist power in hope to make our worlds a little bit freer.

Donxon, you get it. Pot would never have been legalized if large swaths of the population hadn't been willing to defy the government and buy pot, use pot, promote pot, and spread awareness of pot to others. Many pot-Ulbricths now sit in jail as well. We have these brave early activists to thank for todays rapid crumbling of anti-pot laws. Freedom isn't free.

Yes, they are sitting in jail because it is so easy to defy the government, and it will be twice as easy to lock up Bitcoin users for a long train of illegal activity when it comes to a blockchain currency where all the transactions are recorded on the internet.

And you sound like a crotchety old man whose never operated in a black market. Most drug dealers and drug user aren't Ross Ulbricht.I've seen you insist on several occassions that "markets clear." Why are markets for drugs or currencies any different?

When is the DOJ going to start trolling around music festivals arresting upperclass college kids on ecstacy? Is not like it's some big mystery how to do it. Are they just biding their time? They can't even keep drugs out of the prisons. Sure they can identify and smash individual operators, but the customers don't even skip a beat. There are parts of SF where then only hard part is deciding who to buy from. The cops know where these places are. They are unable to stop it.

While RW's accurate observation that Bitcoin can be risky because its "paper trail" is out for all to see is indisputable, I passionately disagree with his clear implication that the conclusion is to abandon Bitcoin, pillory it promoters, and conform to the financial status quo. That’s just reflexive acquiescence to the wishes of the state and its crony partners.

Donxon, your alternative vision is spot on. The question should be how can calculated risks be taken to foster a culture of disobedience like we see among young people rampantly disregarding anti-drug-use laws. This is exhibit A of how if enforcement is made unappealing, costly, impractical, and unpopular, the state will back down. The state doesn't lock up all these young drug users not because it couldn't, but because there are so many of them the PR would be crushing to its own facade of representing “the people.” Vox populi.

Same reason Uber is not shut down. It was thrust into people’s hands before the state could stamp it out, and now people love it and demand it, regardless of what government officials and taxi franchise cronyists blather on about. I’m sure taxi franchise owners said all the same things about Uber that Jamie Dimon says above about Bitcoin.

Hell, the entire state of Colorado is using exactly this technique when it openly defies federal authority and anti-marijuana laws. Colorado state legislators and pot shop owners are not hard for DEA agents to arrest. None have been. Clearly, this technique can be effective.

How to successfully give birth to and foster this culture of defiance that results in the state backing off is exactly what the locus of discussion should be for how to best advance Bitcoin in finance or any other area we want freedom.